Global nightmare, false alarm, or new geopolitical order

It is likely we will see a fundamental shake-up in the global pecking order in the aftermath of the US election.

We have had a month now to calm our jangling nerves. President-elect Donald Trump sat down and had a civilized conversation with President Barack Obama. He promised to keep a couple of popular features of Obamacare and said he understood global warming was partly man-made. But he clearly plans to be an almost omnipotent president. One has only to look at the military men he is recruiting to his cabinet. He will probably control both Congress and Senate for four years and, maybe worse for Americans, shape the Supreme Court for another decade. What can Canada expect and can we find a safe path forward in the geopolitical confusion that is likely to come?

Is it the end of the world as we know it? It is likely we are seeing a fundamental shake-up in the global pecking order. The United States, under a weakened Obama, was already fading. Europe is too weak and divided to be a stand-in. Whatever else, this seems like the end of the US as the all-purpose global leader. The world, shaped by the US, has experienced a decade of mismanaged domestic economic policies that has led to the continuing global financial crisis. This has been combined with a series of misjudged and costly military interventions across Asia and the Middle East, including in Iraq, Syria and Afghanistan. The US is no longer everybody’s favourite model. China and Russia, with their complementary aspirations for regional and global spheres of influence, are likely to become more substantial military powers in the next decade or two, especially if their present partnership holds. Somewhat bizarrely, the Trump of “America First” talks as if, as long as the US is not directly challenged, he is prepared to tolerate their aspirations. Bye-bye Ukraine and South China Sea.

China is expected to regain its global leadership in overall economic performance in the next few years. As it completes a politically driven shift of focus to a pro-poor, internal consumption approach, its economic growth will likely stabilize at a healthy 7 percent per year, on the way to surpassing the US’s gross national income (GNI) by roughly 2025. Especially with the Trans Pacific Partnership (TPP) trade deal dead in the water, China will again become the driver of many global resource markets. It will be dominant in shaping Asian markets, both as a consumer and seller. Geopolitically, it could start to fill the vacated US shoes. Somewhat perversely, the present Chinese approach of boosting domestic consumption to provide jobs for otherwise uncompetitive workers might emerge as a sensible strategy for Trump to use in meeting his own promises to rust-belt voters, those “left behind” poor white male Americans.

However, we should have no illusions that Trump might emerge as a closet liberal, even if he is wriggling back from a few extreme positions on Obamacare and that wall along the Mexican border. As Paul Krugman notes, a Trump-inspired Keynesian push, even one that includes substantial tax cuts for the rich, could temporarily be better than a few more years of global financial crisis. Indeed, for some in the international development community, Trump’s policy message resonates with the UN’s global Agenda 2030, with its signature “no one left behind” policy.

There is no such semi-silver-lining for the Paris agreement on climate change. Last month’s COP22 meeting in Morocco to formalize the treaty put in place a legalistic trick designed to undermine the immediate Trump threat. The treaty now forbids any signatory to withdraw for the next four years. This is mandatory solidarity! Of course, Trump and his emerging team of climate deniers can do a lot of damage inside the US itself, although a couple of European leaders have suggested that they might promote new global trade rules that would apply a special tariff penalty to any country (that is, the US) that fails to meet its carbon reduction target. The Trump threat could also have an inhibiting effect on Canada’s new plan for a universal, slowly escalating carbon tax. We will have to grit our teeth and hope that the benefits of the green technology people are hoping for turn out to be real. (Who knows, in extremis, California, which already co-ordinates some green policies with us, might one day ponder joining Canada!)

Trump’s international policy stances, especially his seeming admiration of Russia’s Vladimir Putin and his hesitation over confronting China, could lead to a whole new set of partnerships. For example, in the UN Security Council, a new alignment of power could sometimes find the US on the side of Russia and/or China, shirking the traditional positions of the G7/OECD block of liberal votes on human rights or international development. Canada could find itself on the losing side of important debates. The situation could be worsened by a division in the voting of members of a diminished European Union and a post-Brexit United Kingdom.

It is hard to define what will be the future path of the other two Asian giants, India and Japan. They certainly have no inclination to kowtow to China, but they desperately need market access and partnerships to sustain their own economic growth. They, probably along with Indonesia, Thailand and even Vietnam, will want to opt into any new China-led agreement that replaces the failed US-led TPP. With political support from a more inward-looking Trump-led USA uncertain, fence-sitting may not be a very easy option. The choices will be even more painful for OECD-linked Japan, South Korea and Australia.

Independent of Trump’s plans, Japan, similar to much of Europe in its current anti-immigrant hysteria, will need to seek out substantial immigration to counter the shrinking of its population. It is increasingly essential for Japan, although it might be culturally painful, to have more person-power to sustain a strong economy. It will need to sign a formal trade deal with China, as well as signing up for China’s Asia Infrastructure Bank. If it does not, its global competitiveness will slowly decline.

India’s situation is more optimistic. It is now, after all, the world’s largest country, in population terms, and the fastest growing economically. But that growth rate is an aberration, the result of China’s transition to a new inward-looking policy, which has temporarily lowered China’s growth rate to closer to 6 percent. Also, because of its long history of intraregional tensions with Pakistan and other countries, India cannot lead its own economic bloc in South Asia. It will therefore need to find an accommodation with China. This should not be impossible, since there is a complementarity in their mindsets and management skills — one the world’s largest democracy, the other the world’s strongest economy (after the US), and both very education/skills-focused societies. They could overcome past tensions and form a great partnership. If that fails, India will likely end up aligning with the US, but only after Trump.

Under Trump, the US might seek once again to be the hegemon for the Americas. This will likely fail. Why would Brazil, Argentina and Mexico, Latin America’s dominant economies, give up their independence when they have their own, albeit more modest, regional partnerships? They will wait for Trump to go, and hope, as will many others, that the US will quickly regain its place as a constructive world leader (hopefully a chastened one), a neighbourly quasi-social democracy just like Canada.

Africa, which has the biggest concentration of the world’s poorest, must find the political will to move to a more inclusive, more equitable and liberal-minded political model. Over the very long term it has untapped potential from its natural resources, land and minerals, but in order to access these it needs a more highly skilled population, and it has to control that population’s growth. It is starting on these journeys, but slowly and erratically. Aid to Africa is a significant part of the US’s assistance program, and it will be be a major setback for Africa if it loses that aid under a President Trump. If this happens, it will also open up even more space for China, whose aggressive aid and investment presence is already by many counts the biggest among all the donors, even the major multilaterals. The impact on Africa of global warming-induced droughts is a new threat to the continent’s progress. This threat will only be compounded if the Trump government stays offside in the global struggle to combat climate change.

The Middle East will require a lot of healing to recover from its multiple wars, many of which the US triggered as a result of its post 9/11 paranoia. The countries most affected are Afghanistan, Iraq, Iran, Syria and Palestine. The US remains an active player in this region, but more as an ambiguous peacemaker than as an active warmonger. The uncomfortable accommodation between Russia and the US as both fight ISIS may even deepen under President Trump, who seems to want to avoid further costly US entanglement in the region’s destructive conflicts. He seems to have lost his bombing blitz urges, as long as there is no direct threat to the USA. This is a possible “plus” point for Trump’s impact (Hillary Clinton was the more eager hawk), but the region’s physical and political rehabilitation will take longer than Trump’s term. The Sunni-Shia/hence Saudi-Iranian competition is deep-rooted, and there is no resolution in sight, unless an even more drastic fall in oil prices makes that competition totally unaffordable for both!

This complex framework of changing power relations points to many challenges for Canada. The US political elite has just had a deafening wake-up call from those citizens who are left behind economically and ignored politically. Canada cannot expect to escape significant collateral damage, living as we do next to this seriously wounded and bitter giant.

We need to be part of the diplomatic effort to get Trump and his administration to recognize the folly of not confronting the existential threat of global warming. Over the medium term, we need to take measured steps to move beyond our historical economic linkages with the now weakened EU and UK, recognizing they alone can no longer be sufficient for our economic future, even our global security. Those steps involve understanding and responding proactively to the major shifts of power and global leadership in Asia. As Australia has already been doing for a decade or more, we need to connect to the emerging networks of Asian partnerships, notably (but not exclusively) those centred on China and India. Less critically, we could bypass the US to link more strongly to Latin America. These networks are not sitting waiting for us; we will need to seek them out and earn their trust. This effort will be part of our commitment to a better global future, including implementing the UN’s Agenda 2030 on sustainable development, as a donor and as a global citizen.

Today’s multi-ethnic Canada is well placed to succeed in these efforts. We should seize this unplanned opportunity for bold changes, to think outside the box. The President Trump crisis facing our southern neighbours should serve as the trigger for a decade of Canadian outreach to the new emerging centres of power in an increasingly multipolar world.

 

URL: http://policyoptions.irpp.org/fr/magazines/decembre-2016/global-nightmare-false-alarm-or-new-geopolitical-order/

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Global nightmare, false alarm or new geopolitical order?

We have had a month now to calm our jangling nerves. President-elect Donald Trump sat down and had a civilized conversation with President Barack Obama. He promised to keep a couple of popular features of Obamacare and said he understood global warming was partly man-made. But he clearly plans to be an almost omnipotent president. One has only to look at the military men he is recruiting to his cabinet. He will probably control both Congress and Senate for four years and, maybe worse for Americans, shape the Supreme Court for another decade. What can Canada expect and can we find a safe path forward in the geopolitical confusion that is likely to come?

Is it the end of the world as we know it? It is likely we are seeing a fundamental shake-up in the global pecking order. The United States, under a weakened Obama, was already fading. Europe is too weak and divided to be a stand-in. Whatever else, this seems like the end of the US as the all-purpose global leader. The world, shaped by the US, has experienced a decade of mismanaged domestic economic policies that has led to the continuing global financial crisis. This has been combined with a series of misjudged and costly military interventions across Asia and the Middle East, including in Iraq, Syria and Afghanistan. The US is no longer everybody’s favourite model. China and Russia, with their complementary aspirations for regional and global spheres of influence, are likely to become more substantial military powers in the next decade or two, especially if their present partnership holds. Somewhat bizarrely, the Trump of “America First” talks as if, as long as the US is not directly challenged, he is prepared to tolerate their aspirations. Bye-bye Ukraine and South China Sea.

China is expected to regain its global leadership in overall economic performance in the next few years. As it completes a politically driven shift of focus to a pro-poor, internal consumption approach, its economic growth will likely stabilize at a healthy 7 percent per year, on the way to surpassing the US’s gross national income (GNI) by roughly 2025. Especially with the Trans Pacific Partnership (TPP) trade deal dead in the water, China will again become the driver of many global resource markets. It will be dominant in shaping Asian markets, both as a consumer and seller. Geopolitically, it could start to fill the vacated US shoes. Somewhat perversely, the present Chinese approach of boosting domestic consumption to provide jobs for otherwise uncompetitive workers might emerge as a sensible strategy for Trump to use in meeting his own promises to rust-belt voters, those “left behind” poor white male Americans.

However, we should have no illusions that Trump might emerge as a closet liberal, even if he is wriggling back from a few extreme positions on Obamacare and that wall along the Mexican border. As Paul Krugman notes, a Trump-inspired Keynesian push, even one that includes substantial tax cuts for the rich, could temporarily be better than a few more years of global financial crisis. Indeed, for some in the international development community, Trump’s policy message resonates with the UN’s global Agenda 2030, with its signature “no one left behind” policy.

There is no such semi-silver-lining for the Paris agreement on climate change. Last month’s COP22 meeting in Morocco to formalize the treaty put in place a legalistic trick designed to undermine the immediate Trump threat. The treaty now forbids any signatory to withdraw for the next four years. This is mandatory solidarity! Of course, Trump and his emerging team of climate deniers can do a lot of damage inside the US itself, although a couple of European leaders have suggested that they might promote new global trade rules that would apply a special tariff penalty to any country (that is, the US) that fails to meet its carbon reduction target. The Trump threat could also have an inhibiting effect on Canada’s new plan for a universal, slowly escalating carbon tax. We will have to grit our teeth and hope that the benefits of the green technology people are hoping for turn out to be real. (Who knows, in extremis, California, which already co-ordinates some green policies with us, might one day ponder joining Canada!)

Trump’s international policy stances, especially his seeming admiration of Russia’s Vladimir Putin and his hesitation over confronting China, could lead to a whole new set of partnerships. For example, in the UN Security Council, a new alignment of power could sometimes find the US on the side of Russia and/or China, shirking the traditional positions of the G7/OECD block of liberal votes on human rights or international development. Canada could find itself on the losing side of important debates. The situation could be worsened by a division in the voting of members of a diminished European Union and a post-Brexit United Kingdom.

It is hard to define what will be the future path of the other two Asian giants, India and Japan. They certainly have no inclination to kowtow to China, but they desperately need market access and partnerships to sustain their own economic growth. They, probably along with Indonesia, Thailand and even Vietnam, will want to opt into any new China-led agreement that replaces the failed US-led TPP. With political support from a more inward-looking Trump-led USA uncertain, fence-sitting may not be a very easy option. The choices will be even more painful for OECD-linked Japan, South Korea and Australia.

Independent of Trump’s plans, Japan, similar to much of Europe in its current anti-immigrant hysteria, will need to seek out substantial immigration to counter the shrinking of its population. It is increasingly essential for Japan, although it might be culturally painful, to have more person-power to sustain a strong economy. It will need to sign a formal trade deal with China, as well as signing up for China’s Asia Infrastructure Bank. If it does not, its global competitiveness will slowly decline.

India’s situation is more optimistic. It is now, after all, the world’s largest country, in population terms, and the fastest growing economically. But that growth rate is an aberration, the result of China’s transition to a new inward-looking policy, which has temporarily lowered China’s growth rate to closer to 6 percent. Also, because of its long history of intraregional tensions with Pakistan and other countries, India cannot lead its own economic bloc in South Asia. It will therefore need to find an accommodation with China. This should not be impossible, since there is a complementarity in their mindsets and management skills — one the world’s largest democracy, the other the world’s strongest economy (after the US), and both very education/skills-focused societies. They could overcome past tensions and form a great partnership. If that fails, India will likely end up aligning with the US, but only after Trump.

Under Trump, the US might seek once again to be the hegemon for the Americas. This will likely fail. Why would Brazil, Argentina and Mexico, Latin America’s dominant economies, give up their independence when they have their own, albeit more modest, regional partnerships? They will wait for Trump to go, and hope, as will many others, that the US will quickly regain its place as a constructive world leader (hopefully a chastened one), a neighbourly quasi-social democracy just like Canada.

Africa, which has the biggest concentration of the world’s poorest, must find the political will to move to a more inclusive, more equitable and liberal-minded political model. Over the very long term it has untapped potential from its natural resources, land and minerals, but in order to access these it needs a more highly skilled population, and it has to control that population’s growth. It is starting on these journeys, but slowly and erratically. Aid to Africa is a significant part of the US’s assistance program, and it will be be a major setback for Africa if it loses that aid under a President Trump. If this happens, it will also open up even more space for China, whose aggressive aid and investment presence is already by many counts the biggest among all the donors, even the major multilaterals. The impact on Africa of global warming-induced droughts is a new threat to the continent’s progress. This threat will only be compounded if the Trump government stays offside in the global struggle to combat climate change.

The Middle East will require a lot of healing to recover from its multiple wars, many of which the US triggered as a result of its post 9/11 paranoia. The countries most affected are Afghanistan, Iraq, Iran, Syria and Palestine. The US remains an active player in this region, but more as an ambiguous peacemaker than as an active warmonger. The uncomfortable accommodation between Russia and the US as both fight ISIS may even deepen under President Trump, who seems to want to avoid further costly US entanglement in the region’s destructive conflicts. He seems to have lost his bombing blitz urges, as long as there is no direct threat to the USA. This is a possible “plus” point for Trump’s impact (Hillary Clinton was the more eager hawk), but the region’s physical and political rehabilitation will take longer than Trump’s term. The Sunni-Shia/hence Saudi-Iranian competition is deep-rooted, and there is no resolution in sight, unless an even more drastic fall in oil prices makes that competition totally unaffordable for both!

This complex framework of changing power relations points to many challenges for Canada. The US political elite has just had a deafening wake-up call from those citizens who are left behind economically and ignored politically. Canada cannot expect to escape significant collateral damage, living as we do next to this seriously wounded and bitter giant.

We need to be part of the diplomatic effort to get Trump and his administration to recognize the folly of not confronting the existential threat of global warming. Over the medium term, we need to take measured steps to move beyond our historical economic linkages with the now weakened EU and UK, recognizing they alone can no longer be sufficient for our economic future, even our global security. Those steps involve understanding and responding proactively to the major shifts of power and global leadership in Asia. As Australia has already been doing for a decade or more, we need to connect to the emerging networks of Asian partnerships, notably (but not exclusively) those centred on China and India. Less critically, we could bypass the US to link more strongly to Latin America. These networks are not sitting waiting for us; we will need to seek them out and earn their trust. This effort will be part of our commitment to a better global future, including implementing the UN’s Agenda 2030 on sustainable development, as a donor and as a global citizen.

Today’s multi-ethnic Canada is well placed to succeed in these efforts. We should seize this unplanned opportunity for bold changes, to think outside the box. The President Trump crisis facing our southern neighbours should serve as the trigger for a decade of Canadian outreach to the new emerging centres of power in an increasingly multipolar world.

Global Nightmare – Trump and a new geopolitical order

cips-logo

Global nightmare, false alarm — or a first step to a new geopolitical order?

posted OU CIPS.  November 22, 2016. John Sinclair

[ Also see expanded text  published Dec 2016 on ‘Policy Options’ ]

We have had a few days now to calm our jangling nerves. President-elect Trump has already had a civilized conversation with President Obama and “promised” to keep a couple of features from Obamacare. But he is going to be an almost omnipotent president, controlling both Congress and Senate and, maybe worse for Americans, shaping the Supreme Court for a decade or more.

Is this the end of the world as we know it? Or was the US, even under Obama, already fading as the all-purpose global leader? After a decade of badly mismanaged global and domestic economic policies, plus a series of costly interventions across Asia and the Middle East, the US is nobody’s favourite. China and Russia, especially if they collaborate, are as likely to be global stars in the next two decades. China may also regain its traditional economic lead as it completes its shift to pro-poor, internal consumption-driven growth (stabilizing at a healthy 7% p.a.). Interestingly Trump may launch that very same domestic strategy to meet the demands of his core voters, the “left behind” poor white males.

However, Trump will never emerge as a closet liberal, even if he has already wriggled away from some extreme positions on Obamacare and that Mexican wall. As Paul Krugman notes, even a Trump-inspired Keynesian push, including some tax cuts for the rich, is temporarily better than more years of global financial crisis. Indeed, for development folks, some of Trump’s messages actually resonate with the core theme of the just-launched UN Agenda 2030 and its “no one left behind” signature policy.

There is no such silver lining for the Paris treaty on climate change. The Morocco meeting that just formalized the treaty used a legalistic trick to undermine the Trump threat by denying any signatory the right to withdraw for the next four years. Of course, Trump and his team will likely do much damage inside the US itself, although a couple of European leaders have suggested that any country failing to meet its carbon reduction targets could be sanctioned via tariffs. The Trump threat could certainly have an inhibiting effect on Canada’s plan for a carbon tax. We will have to grit our teeth and hope for the promised new job benefits of green technology. Maybe California, which already coordinates green policies with us, will simply opt to join Canada.

Trump’s international policy stances will likely lead to a completely new set of geopolitical partnerships. Around such Security Council issues as human rights or development, we may start to see an alignment of Trump’s USA with Russia and China pushing back with their triple veto. On the liberal side might be a diminished EU, supported by Canada, and a struggling post-Brexit but still veto-wielding UK.

It is hard to define the future path for Japan and India, who have no inclination to cow-tow to China, but desperately need access and partnership for their own growth.

To break out economically, Japan must reconcile itself to substantial immigration for the person-power to sustain a strong economy. Failure means likely joining the post “hard Brexit” UK as a struggling, once major economy.

India has a more optimistic outlook. It is now the world’s fastest growing population, but that lead is an aberration, the result of China’s pro-poor, internally focused growth  policy. India must accommodate with China; their complementarity of mindsets and management skills could produce a great partnership. If that fails, India will likely align with the US, but only post-Trump.

Under Trump, the US might seek once again to be the hegemon for all the Americas. This will likely fail. Why would Brazil or Argentina give up their policy independence? They will wait for Trump to go, hoping that the USA regains its place as a world leader, but a chastened one, as a sensible social democracy like its neighbour to the north.

Africa, with the biggest concentration of the world’s poorest, must find the political will to move to a more inclusive, more equitable political model. It is starting on that political journey, but slowly and erratically. The prospects of losing a significant part of the USAID programme under Trump will be a major setback. The growing impact of global-warming-induced droughts on Africa has its own accelerating pace even without Trump’s Myron Ebell compounding it.

The Middle East has much healing still to do from the series of wars, often rooted in US post-9/11 paranoia: Afghanistan, Iraq, Iran, Syria, and Palestine. The US is now more a struggling ambiguous peacemaker than an active warmonger. The recent accommodation between Russia and the US in fighting ISIS may deepen under President Trump, who seems to want no role in such costly situations. This is a possible “plus” point for Trump’s impact (Hillary was the greater hawk) but it will take longer than Trump’s term to achieve the physical and political rehabilitation needed to put this region back on its feet.

This framework has many suggested challenges for Canada. Canada cannot hope to be immune from the certain shake up for US political actors, both the inner elites and the grassroots, but should instead seize this forced opportunity for bold changes.

Canada will join the immediate diplomatic effort to get the Trump administration to recognize the folly of not confronting the existential threat of global warming. We will retain our historic linkages to the weakened EU and UK but recognize they can no longer be sufficient. We also need to understand and respond proactively to the major shifts of power in Asia. We need to connect to new partnership networks with Asia, critically China and India, and perhaps by-pass the US to link more strongly with Latin America.

Finally, we must not overlook our commitment to implementing Agenda 2030, ensuring “no one left behind,” not only in the American rust belt, but globally.

http://www.cips-cepi.ca/2016/11/22/global-nightmare-false-alarm-or-a-first-step-to-a-new-geopolitical-order/

Expanded version in Policy Options,

http://policyoptions.irpp.org/fr/magazines/decembre-2016/global-nightmare-false-alarm-or-new-geopolitical-order/

 

 

 

China Domino Tactics boost Infrastructure Bank

China’s Domino Tactics Boost Infrastructure Bank

Posted on CIPS site  March 22, 2015 by John Sinclair

China is looking ever the experienced super-power. In a week it has scooped up all the important European dominos, humiliating a U.S. government which has lobbied hard to block the launch of China’s new $50b Asian Infrastructure Investment Bank (AIIB).

The dominos have fallen quickly. Last week it was the UK’s turn to join, preferring its commercial interest and geo-political judgment over its friendship with the U.S. Now it is a coordinated set of EU announcements from France, Germany and Italy. The driver was their desire to be well-connected economic partners in Asia, but there was also an element of blowback on U.S. geo-political arrogance, be it spying on Angela Merkel or military jingoism towards Russia.

What we are seeing is an ongoing power play that will shape the future world as much as the impact of climate change will.

 A little history. A war about global power has been ongoing for a few years, ever since the West recognized that the emerging economies, the BRICS and a few others were global forces—ones in many cases already more powerful than the also-rans in the G7, such as Canada. But the West failed to be serious about expanding its vision, remaining wary of letting go; if anything, it has become more assertive about the primacy of an older order.

An early battleground has been the global financial institutions. Key BRICS countries demanded concrete recognition of their central role in saving the world from the U.S.-UK banking de-regulation folly that led to the global financial crisis. They demanded a fair (i.e. larger) share in the governance of the IMF and the World Bank, which are still dominated by the West, with an embedded U.S.veto.

The U.S. was surprisingly open on this front, but maybe they liked to see mid-sized Europeans nations such as Belgium being put in their place. Reluctantly, these over-represented countries were pushed by the U.S. into agreeing to give up their excess voting rights to China and India. At first, reason seemed to be prevailing, but then the modest first step for the IMF was blocked by the absurdities of U.S. politics in an obstreperous U.S. Congress.

Last year, frustrated and impatient BRICS leaders moved to Plan B: creating a rival world of global financial institutions. Meeting at their own summit in Brazil, they set up a $50b World Bank clone and a $100b Contingent Reserve Fund, a mini-IMF, which will likely yet save Russia from the worst of present Western sanctions.

China wanted even more: a better home for its trillions of U.S. dollar bonds but also a vehicle to finance the massive infrastructure needs of Asia that it saw as essential to its and their future as trading partners. Last October, it created ‘its’ Asian Infrastructure Bank, as a serious competitive threat to the Japanese and U.S.-dominated Asian Development Bank (ADB). There is luckily room for both, with the ADB estimating Asian infrastructure needs at $1 trillion a year.

The first flood of those joining China were 21 mid-sized Asian economies, such as Singapore and Indonesia. While friends of the U.S. and the World Bank, they welcomed a new, maybe more accommodating, funding source. The U.S., with its ‘tilt to Asia’ strategy, leaned hard on Japan, Australia and South Korea not to join. Once again America found itself forcing its Asian friends into taking sides in an unwanted struggle (this time economic, not military) with China’s assertive President Xi Jinxing. Instead of ‘win-win’, the U.S. now finds itself between a rock and a hard place. After the European moves, will these key U.S. allies in Asia be the next dominos to fall?  None of them wants a fight with friends over a bank they objectively welcome.

The present tension and stalled progress towards a better partnership has only accentuated the challenge to the existing Western-driven framework of multilateral financial institutions. Sensible technical concerns about environmental safeguards were transformed into a political campaign to oppose Asian ambitions for stronger, locally controlled, development institutions.

A similar tension could lead the Trans-Pacific Partnership (TPP) into becoming another domino to fall. This trade deal is being driven at top speed by America towards what critics describe as a set of rules designed to favour U.S. financial services, while also politically containing China with its growing strength in world markets.

What we are seeing is an ongoing power play that will shape the future world as much as the impact of climate change will. We are not talking G2 partnership, but rather now arm-wrestling between two great powers. There could well be a lot of collateral damage as they struggle rather than choosing to co-operate in dealing with more fundamental challenges such as global warming and widespread inequality. One has to wonder what is happening politically and socially in today’s U.S. that leads it to choose conflict and tension over peace and compromise on so many fronts—not just China and its infrastructure bank, but also Iran and Ukraine.

Where will Canada find itself? It will likely be almost the last G7 country to join, falling further back in its ambitions for better economic relations with Asia. The scale of all this Chinese funding also somewhat mocks the role of Minister Paradis’ possible Canadian Development Finance Institution. Canada should now be more strategic and begin to look outside our comfort zone to build relationships with new global actors.

Posted as: http://cips.uottawa.ca/chinas-domino-tactics-boost-infrastructure-bank/

Who’s Leading the world?

Who’s Leading the World?

August 11, 2014 by John Sinclair.                 http://cips.uottawa.ca/whos-leading-the-world

The simple but disturbing answer is: nobody.

Our world has over a billion people still living in extreme poverty. There are 25 million jobless in Europe. Jihadists control half of Iraq. The Doha Trade Round is in its 13th year without producing any major benefits. And we are burning carbon ever faster, bringing ourselves closer to global warming disaster.

Meanwhile the G7 seems focused on reviving the Cold War, while the G20 is stuck in first gear working mainly on institutional reform in the mega-banking sector. G2 is a non-starter: the USA and China have very different worldviews.  Despite a recent boost for the UN’s leadership in transposing old MDGs into new Sustainable Development Goals for 2015-30, ultimately it is a tired and underfunded family of institutions. Even the BRICS—who are key to future global leadership—are in defensive mode and starting to create their own parallel world of institutions.

This is not anarchy: things are being done, and some crises are being tackled (especially when they hit the CNN headlines). But leadership and vision are absent. We are seeing institutional frameworks that should complement each other instead struggling to protect old turf. Competition, rather than partnership and co-ordination, is still the norm. Meanwhile, jobless growth in often unequal societies is squandering the potential of the next generation, driving the young towards social apathy and even terrorism.

Much of the flawed leadership can be linked to the 2007 global financial crisis, which transformed a modest club of finance ministers into the Leaders’ G20. The crisis proved beyond the capability of the G7 alone: it was China’s economic weight (and its four trillion dollars of US Treasury bonds) that proved key to financial rescue.

The G20 rescue plan was too single-mindedly focused on stabilization (i.e. saving those “too big to fail” banks); creating jobs was only a secondary consideration. As a result, the crisis still casts a cloud over the world economy. Global stagnation has become the new norm: seven years into the crisis, the IMF has just lowered its 2014 world growth forecast.

And now the global governance framework is getting into deeper geo-political trouble with Russia’s expulsion from the G8 for its actions in Crimea. The likely tragic error of an incompetent Ukrainian separatist shooting down the wrong plane has raised Cold War tensions to heights not seen in decades.

Almost at the same time, there was a critical action in Brazil at the latest BRICS Summit. This group now represents over a quarter of the global economy, outshining the old G7 in growth. Reflecting their frustration at the failure of Western governments to deliver on promised first steps towards rebalancing power within the World Bank and the IMF, BRICS leaders announced two new global instruments. One is the New Development Bank (NDB), a World Bank clone designed to finance infrastructure and other development projects, with an initial $50 billion in capital and a $100 billion Contingent Reserve Arrangement to replace key functions of the IMF. By 2016 the NDB will move into a glossy HQ tower in Shanghai under its first president, an Indian.

So where are we going with global governance?

The news seems uniformly bleak. The G8 is dead, leaving the G7 as an old Western clique. The G20 is underperforming even in reforming global financial systems. Now this year’s chair (the Australian PM) again wants to expel Russia, a move that could shatter the organisation. Meanwhile, the BRICS are racing ahead building a parallel governance framework driven by the global South.

Even the conservative editors of the Economist, according to their commentary last month, think the North is missing the boat in blocking the South from its fair share of leadership in the world of multilateral organisations. On the urgent issues of trade reform, political reconciliation and climate change, G7 leaders seem to want such items kept off the G20 agenda because that wider forum would be too ‘unmanageable’ (i.e. would not meekly buy into the G7’s worldview). And is it just coincidence that in the first nine G20 meetings, the summit has never been hosted by any of the developing countries who constitute 8 of its 20 members?

Sadly, neither North nor South seems ready for change. Drift seems to be the favoured scenario, even in the face of growing global challenges. Both hide from the reality that global economics and politics are increasingly intertwined. They grumble at indecision in the UN Security Council (UNSC), a body unaltered since it was created to include only World War II victors. Critically, no existing or aspirant member wants to give up their blocking UNSC veto. The concern is that the North will sign on to bold Post-2015 goals in the UN, but then refuse the funding and other actions needed to implement them.

Canada, once a leader in the multilateral domain, is now seen as a spoiler and foot-dragger. We were the biggest cheerleader for expelling Russia from the G8, and now we and the Australians seem to oppose any idea of broadening the G20’s mandate. We prefer to revel in the fantasy of the G7 as the world’s natural leaders, while countries of much greater significance (e.g. China and India) sit by in a hamstrung G20.

It would seem that Canada and others in the G7 find it difficult to deal with nations holding a different—and increasingly important—worldview.  It might be a bold move for Canada to encourage a moreinclusive G20, with a voice for the weakest as well as the most powerful. At present, however, political insecurity is keeping a weakened North distant from its future partners in the South.

The G8 is dead; long live the G7?

It’s not so long since we praised the new G8, with Russia present as a bridge to the new emerging BRIC giants, notably China and India. Then it got dull and repetitive, mainly some competitive show-and-tell between photo-ops.

But now! Expelling Russia the G7 seems to be re-shaping itself into the Cold War II Co-ordination Committee. It has found new relevance for itself and NATO, reviving old rivalries. Albeit largely token sanctions have been imposed on rich Russians foolish enough to use US banks. Canada’s warrior class are having a field day, even if most Canadians, like other G7 citizens, and especially the business community, would rather their governments focus on jobs and sustainable growth.

Energy shortages are now a big worry for a Europe dependent on gas pipelines through Ukraine. The worry was compounded by the recent Russia–China summit in which they signed a $400b/30 year gas deal, deflating Canada’s own LNG dreams.

All this is because of Ukraine, known for many years as a mess of corruption and poor governance. Just a month or so ago, we had the drama of the overthrowing of its elected but corrupt president by street protesters and then Crimea was re-joined to Russia. Now a billionaire oligarch known as the Chocolate King has been elected President in Ukraine. Are the G7 helping him find a compromise package with some Canadian style federalism? Or stirring the pot to poke at Russia? At very least he will be sending some thank-you after-dinner chocolates to the Brussels, despite the superior quality local brand.

Rounding out the month, European voters in EU-wide elections soundly rejected the mainstream parties in favour of extremists of both left and right. They seem to saying that EU policy-leaders’ obsession with fiscal rectitude was destroying popular hopes for an end to a jobless ‘recovery’.

So what can we expect from this week’s mini-G7 Summit (June 4-5), chaired by those very same chasten EU leaders in Brussels?

Especially after the EU elections, the big focus should be on the still stumbling economic realities. Even if the macro-numbers are marginally positive, they have no depth and politically critical youth unemployment levels remain stubbornly high. The push on trade is all about more minor bilateral deals – multilateralism is forgotten. Canada is a key culprit here. But multilateralism means coming to terms with trading with the emerging economies, which means moving the debate to the G20 for any serious action.

The recent wake-up call from IMF head, Christine Lagarde, saying G7 governments have still to create a set of rules for too-big-to-fail banks, deserves urgent attention. But it is more likely to become another ‘to do’ item on the G7 accountability list.

Ukraine is the topic that will excite most attention, whilst exposing again the sharp differences between those who want peace in Europe and those who want to wave cold war flags again. We know where Canada unfortunately lies on this topic, even without our large Ukrainian diaspora. Ukraine will be at the centre of an G7 debate on energy security, meaning less dependence on Russian gas. But nothing can be done quickly; international pipelines as Canadians know well, can take years to start, let alone finish.

They will have a lot of routine business, much carried over from the last G8 meeting under an energetic UK PM. But most G7 leaders are looking politically weaker this year, especially President Obama and his French counterpart.

The big push in 2013 was around PM Cameron’s Tax and Transparency package, but this is tricky because it needs a world of harmony in which everybody agrees to simultaneously squeeze the tax evaders and those active in the illicit flows. Everybody is a tricky group: oligarchs from the former Soviet Union, corrupt elites in the developing world and the matching corrupters, business leaders in the OECD countries. 2014 will produce another list of unfulfilled promises by G7 leaders and their finance ministers. It’s the same postponement story on making sure offshore extractive industries pay taxes at both, not neither, end.

Mr. Harper, fresh from his MNCH summit in Toronto will be looking for some words of praise and pledges of new donor money to match his cash. No Europeans came to his Toronto event and as big donors long before Canada they are not likely to buy into his restricted version of reproductive rights.

Climate change will be on the agenda with a greater sense of urgency. President Obama finally lost patience with his Tea Party dominated opposition in Congress and took executive action, cutting the use of coal in power plants. The Europeans, years ahead on this front at least, will welcome him into the believers’ club. This leaves Canada increasingly isolated in resisting a new binding agreement to succeed Kyoto.

G7 countries will also be preparing to sign up to the UN’s Post-2015 Agenda. Negotiations are due to start in earnest in the coming months, with a final agreement set for signature at the UN in Sept 2015. Canada is inevitably going with the tide. We don’t want to be seen opposing poverty elimination and universal goals, especially not just before an election where inequality might be a big issue.
All this sounds a busy agenda for a less than 24 hours meeting. Of course the leaders’ sherpas have been drafting ‘their’ conclusions, that ‘communiqué’, for well over a month now.

But is this even more shrunken G7 a serious global voice? One worrying signal when the BRICS publically told Australia’s PM to stop fantasising that, as this year’s G20 chair, he could expel Russia. Instead key European G7 leaders have set up formal meetings with Putin at the D-day celebrations. Presumably, the hard-headed realists amongst G7 leaders, but not Canada, will be signalling privately that a G20, one with Russia and the BRICS, has to be protected as the main vehicle for global leadership discussions, bar the UN Security Council.

All this is not good news for today’s Canada which relishes the G7 prestige and is not ready for all that partnership stuff with emerging powers.